During a July Senate hearing evaluating the impact of Super PAC funding on elections, Harvard Law Professor Lawrence Lessig included a frightening metaphor in his testimony. He pointed out how, before the Citizens United decision, “our democracy was already broken.” So much so, that though “Citizens United may have shot the body, the body was already cold.”
This graphic allegory is oddly fitting. Outsize corporate influence on policy-making existed long before the Citizens United decision. The case has only exacerbated the problem by decreasing the legal risk for corporations who explicitly advocate on behalf of political causes. Repealing Citizens United via a constitutional amendment or targeting corrupt political officials and forcing them out of office would be akin to surgically removing bullets from a dead body. It would be time-consuming, expensive, and of little use. The concern we face with the problem of corporate influence in politics must be addressed with more fundamental and systemic changes than mere governmental reform.
The question we must ask ourselves is why the interests of corporations are not aligned with the interests of society. In their opinion on Citizens United v. Federal Election Commission, the justices of the majority implied that the speech of corporations is equivalent to the speech of “citizens, or associations of citizens.” The idea that corporate influence in politics can occupy the same civic position as individual influence is misleading at best. This is for two reasons: American corporate leadership currently faces no legal obligation to consider the interests of all company stakeholders when pursuing profits, and corporations are under no legal obligation to represent wide stakeholder interests on the board.
It is not wild to imagine that, if stakeholder interests, particularly those of employees and local communities, were better represented in corporate leadership, corporations could conceivably be the most effective voices for reform with respect to issues such as shoddy workplace conditions and failing social safety nets. Kent Greenfield, a professor of corporate and constitutional law at Boston College, recently argued for such reforms, noting also that the changes would create an “improvement in the initial allocation of wealth [that] is bound to be more efficient in lessening inequality than having government redistribute wealth after the fact.”
A rare glimpse of how a more representative corporate governance model can become the norm in society is offered in a poignant Financial Times article from eleven years ago. Hireshi Okuda, at that time a chairman of the Toyota Motor Corporation, spoke before a group of wealthy managers at a fancy restaurant, urging them not to embrace an exclusively shareholder-directed model of corporate governance because of “what Japanese junior high school textbooks say about corporate social responsibility. Under Japanese company law, they explain, shareholders are the owners of the corporation. But if corporations are run exclusively in the interests of shareholders, the business will be driven to pursue short-term profit at the expense of employment and spending on research and development. To be sustainable, children are told, corporations must nurture relationships with stakeholders such as suppliers, employees and the local community.”
A more representative system of stakeholder governance is the norm in Germany as well, where the co-determination model makes employee representation at the board level mandatory for many corporations. At the January 2011 World Economic Forum, John Studzinski, managing director of The Blackstone Group, commented on how, though it “may be odd for managers,” board-level employee representation in Germany “introduce[d] a range of new perspectives,” which played a role in Germany’s success mitigating the impact of the financial crisis. If American wealth management firms had mandated stakeholder governance systems, long-term societal interests would certainly figure into their activities more often.
Professor Greenfield asserts that a national corporate law standard under the power of Congress’ Commerce Clause could better bring corporate interests in line with societal interests. Our legislators should seriously consider this proposal. In what would perhaps be one of the most fitting applications of the otherwise loosely applied commercial clause, the engines of capitalism could begin to resuscitate a dying democracy.
Nikhil R. Mulani ’14, a Crimson editorial writer, is a classics concentrator in Eliot House.
Harvard Law Talk Stresses Corporate Responsibility
Firms as DiplomatsToday, businesses can do the best job of advocating for human rights
OCS Offers Finance Bootcamp
Ditch the Corporate TaxThe best corporate tax reform would involve ditching the tax altogether.
Giving Back MeaningfullyThis well-endowed university should carefully review the motives of proposed corporate investments in order to maintain the integrity of its Wall Street alliances.
A New EraIn the spring of 1976, a young woman graduated from Harvard College with a degree in History and Literature. While ...